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I thought Daniel brought up an interesting point in response to this article: that Brexit could pose an opportunity–rather than a threat–to Tesco’s sourcing, supply chain, and pricing model by forcing the company to work with international suppliers outside of the EU (and without the constraints of the EU’s stringent standards).

The United States, for example, has been able to produce more food efficiently and cheaply than the UK and EU. In one key area, livestock farming, the US leverages efficiencies by using growth hormone to increase production and yield, a practice that is banned in the EU. As a result, the US supplies only 0.1% of Britain’s beef — in contrast with supplying 20% of the world’s beef. [1] Brexit could drive this number upwards as retailers like Tesco are forced to source cheaper beef and other livestock from suppliers outside of the EU; as a result, consumers may see little to no price change on their end.

Of course, such a change introduces other questions: Is Britain okay trading price for such different (and arguably lower and less stringent) production standards? And will the consumer even be made aware of these tradeoffs?

[1] http://www.bbc.com/news/business-40530700

While I have a lot of moral opinions about the role that technology companies — namely, Facebook and Google — can and should play in mitigating disinformation, I think it might be more interesting to explore the economic role of other players in this ecosystem. Namely, the theory of a free market would indicate that the advertisers play the most crucial role in punishing “bad actors”; by blacklisting those publishers, YouTube channels, websites (and so on) that are proven to spread disinformation, these entities can de-facto shut down bad actors by choking off their access to capital via advertising revenue.

Of course, this mechanism of control is easier said than done. For a long time, Google failed to provide appropriate tools to target publishers of false information, hate speech, and the like, making it difficult for advertisers to prevent their money from reaching such “bad actors”. However, now that such tools are more readily available, advertisers themselves can drive much of the change needed in this ecosystem, without fully relying on Facebook, Google, and other platforms to be the de facto arbiters of appropriate speech. While a reliance on a group of advertisers isn’t much better than a reliance on a few technology companies, it certainly does diffuse the responsibility more broadly and show how — if platforms develop the adequate, neutral monitoring tools — they can encourage others to participate more fully in the conversation around free speech and democracy in the internet age.

I completely agree with Amanda and other commenters here that Ford should ignore the short-term implications of the Trump administration’s stances. Not only will these pressures likely reverse themselves over the next 4-8 years, as TJ indicated, but also it’s unclear whether the Trump administration’s claims are anything more than bluster. Thus far, the administration has not fulfilled any of its protectionist and isolationist threats. For example, neither the promise of 35% tariffs on companies relocating to Mexico nor that of 45% tariffs on goods from China have been implemented [1] and, given the number of other items on Trump’s agenda, it seems unlikely that they will come to fruition any time soon. Ultimately, a corporation’s capital investments should rely on a relatively long-term view of the world and, given the widespread analyses indicating how detrimental isolationism is to both the US and world economies [2], it seems like Trump’s protectionist agenda will be ephemeral at best — and, more likely, not existent in the first place.

[1] https://www.economist.com/news/special-report/21729868-does-american-presidents-protectionism-pose-threat-emerging
[2] http://time.com/4396708/donald-trump-protectionism-world-economy-lagarde/

Great piece, thanks for sharing. I think both Matt and Sasha also hit on some interesting long-term issues as it relates to Netflix’s long-term relationship with Disney and other major content creators. I wanted to add a perspective based on personal experience, as I worked at Disney on its subscription services’ strategies (including for Hulu, as Disney was a minority owner) from 2012-2014.

While at Disney, I helped create the business model for a direct-to-consumer, OTT subscription service (a precursor to the proposed ESPN/Disney products being launched in 2018/2019). As Matt states, Disney is the best-positioned content creator to provide such a service due to a strong brand name & franchises, not to mention a reputation for best-in-class customer experiences. However, the company has a number of weaknesses relative to Netflix:

(1) Few direct consumer touchpoints and, as a result, limited customer data:
Netflix has spent years collecting detailed data on its viewers — willingness to pay; product/technology requirements (e.g. do they need conditional downloads to watch in areas without wifi and, if so, how many?); genres of interest; etc. Disney has not. In contrast, almost all of Disney’s customer relationships (with the exception of the Parks and its web properties) are mediated through third parties such as MVPDs, theatrical distributors, and most recently, Netflix itself. As a result, Disney has forfeited its ability to collect granular data that could inform its own production decisions in response to consumer preferences. Moreover, it has failed to collect detailed customer contact information, meaning that its marketing costs will be astronomically high.

(2) Limited market opportunity relative to Netflix:
The downside of a strongly-defined brand is the difficulty of expanding outside of that brand! Disney has an inherently limited market opportunity with respect to its subscription services: The Disney service will largely appeal to families with young children, while the ESPN service primarily will appeal to men [1]. Netflix, on the other hand, is known for having a broad array of content that appeals to all audiences — a reputation that is difficult for Disney to match, even if it were to include ABC and other brands in a DTC bundle.

(3) Significant windowing restrictions:
Customers’ willingness to pay will be directly related to their perceived value of the service, which in turn is related to the library of content (and addition of new content over time). Unfortunately for Disney, many of the company’s best titles are tied up due to pre-existing licensing relationships — and the timelines and restrictions on these titles vary by region. Netflix, on the other hand, is relatively protected by its content volume and diversification of titles across studios (although, as Sasha pointed out, the threat of its original content operation may drive the studios to pull their own content from the service), such that the loss of any one title or set of titles is less detrimental to the perceived value of the service.

Ultimately, the above boils down to one key competitive issue: the speed and success with which Netflix can vertically integrate into content creation versus the speed and success with which Disney (and other content creators) can move into distribution. Or as Ted Sarandos said: “The goal is to become HBO faster than HBO can become us.” [2] We’ll see how it all shakes out!

[1] http://www.espn.com/espn/story/_/id/7379853/espn-tries-solve-equation-women-sports-fans
[2] https://www.newyorker.com/business/james-surowiecki/netflix-worried-hbos-streaming-plans

As an avid skiier, this information depresses me! To that end, I’m sure it would be impactful to share these statistics with other faithful carriers of the Epic Pass. Does Vail communicate any of these facts with its customers? If not, the company should consider developing a marketing campaign around the topic; Vail could educate skiiers about the issue, encourage them to live more sustainable lifestyles, and ask them to donate to various climate change initiatives. While such tactics may have a minimal impact on climate change, they would serve at least two other purposes: (1) Spreading the word on a vitally important issue; and (2) Protecting Vail’s reputation when it has bad snow days/seasons (i.e., I might be less angry about paying hundreds of dollars in a no-snow season if I understand the root cause of Vail’s poor conditions).

Another point not addressed in Anna’s piece above: Climate change doesn’t only implies less snow; it also means that worldwide weather patterns will be increasingly unpredictable. [1] As a result, summer programming and geographic diversification may not fully address Vail’s problems. Artificial snowmaking helps, but perhaps Vail could also develop additional indoor facilities to teach skills — e.g., mogul-skiing or half-pipe tricks — when there’s a bad day outside?

[1] https://www.epa.gov/climate-indicators/weather-climate

Sweetgreen has an admirable commitment to sustainability and locally-sourced ingredients; however, it remains to be seen how effective (and how committed) the company will be in maintaining these values as it continues to scale.

In particular, I agree with the author that the company should outline a concrete vision and measurable targets with respect to its sustainability goals. Absent such goals, it is difficult to take Sweetgreen seriously when it claims to be “transparent”; for example, the company’s website includes a series of vague claims about its sustainability without concrete data to back them. Absent additional information, it’s difficult to assess how effective the company is — and makes sustainability look more like a marketing ploy than a business goal.

Further supply chain digitization could help the company achieve such transparency going forward. Today, Sweetgreen demands that its suppliers (e.g. Jayleaf for greens in California and Keany Produce in Maryland) regularly log into its supplier portal to provide data on produce sourcing, production volume, supply to each store, etc. [1] The company should attempt to (1) aggregate this information and provide it to consumers; (2) begin to specify and quantify how it is working with suppliers to improve their processes; and (3) build upon its existing information collection processes by including information on crop yields, farm water consumption, and overall environmental impact. By providing this information to both internal and external stakeholders, the company will demonstrate an authentic commitment to its sustainability mission — and make its mission more achievable at scale by providing and sharing information about best practices amongst its suppliers.

[1] https://www.inc.com/magazine/201710/lindsay-blakely/sweetgreen-supply-chain.html